Faith Wanjugu, who fled Kenya after her family was massacred in 1998, challenged the decision to relocate her from London to Swansea on grounds that Swansea lacks the specialist trauma care she desperately needs.
Her judicial review challenge was heard in London's High Court today by Mr Justice Elias, who declined to quash NASS's decision - but nevertheless urged the government agency to reconsider her case.
NASS lawyers agreed to do so within a 14-day time frame.
Mr Justice Elias observed that, although the decision may again go against Miss Wanjugu, but added: 'Whatever the rights and wrongs, there is a woman here suffering from chronic post traumatic stress disorder, which is clearly a terribly difficult thing for her to cope with.
'It's something that really needs to be dealt with sooner rather than later.'
Although NASS's original May 2003 decision could not be legally faulted, the judge said it failed to spell out its reasons and give a 'cogent explanation' for standing by its decision.
Miss Wanjugu's asylum claim was dismissed by the Home Office in 1999, but she still has an outstanding human rights claim in the pipeline, the court heard.
Her counsel, Simon Cox, said she had begun to establish a settled life in London, commencing a university pharmacy degree, before NASS stepped in.
He told the judge: 'This is a woman damaged by the experiences she suffered, who was undergoing intensive treatment at an NHS centre for excellence.
'The effect o f depriving her, not only of that treatment, but also of all her friends and social network, has been to trigger what is now a borderline psychotic episode.
'The sad thing is that when this started she was not psychotic, she was getting better. She is now near to psychotic because she has been dispersed to Swanseea.'
Mr Cox also relied on a letter from Miss Wanjugu's psychiatrist at London's Traumatic Stress Clinic, stating that 'there are no specialised trauma services in Swansea.'
Mr Justice Elias said NASS had later written to her solicitors offering to relocate her to Newcastle where she would find psychiatric services 'specially geared to the needs of asylum-seekers with post traumatic stress disorder.'
But that offer was declined, said the judge.
STRAND NEWS SERVICE